On Friday, October 3, 2008, the Federal Deposit Insurance Corporation (FDIC) increased the amount of automatic federal insurance on savings accounts held by FDIC participating banks from $100,000 to $250,000. This increase was largely in response to investors withdrawing large sums from their bank accounts in reaction to the recent failure of several large established financial organizations.
In the past, investors were aware of the FDIC limit, but generally felt safe in exceeding that limit " sometimes by a large amount. These days, many are taking a closer look at the safety of all of their investments.
The increase in the FDIC limit is designed to give investors greater confidence in maintaining larger savings account balances. Thus, providing banks with more money to lend, and in turn easing the credit crunch.
The increase means that an individual may have up to $250,000 in any one bank secured by the federal government (including all deposits at a single bank held in checking accounts, savings accounts, certificates of deposit (CDs), and half of the value of a joint account) and brings the insurable limit equal to that of an Individual Retirement Account (IRA). Note that an IRA held at a bank has a separate $250,000 limit from other accounts held at the same bank.
Many banks have offered creative programs to expand FDIC protection for their customers. When a customer holds funds in excess of the limit, a bank may partner with other banks to share the deposit. While the customer deals with only one bank, the customers funds are actually held by multiple banks taking advantage of the full $250,000 protection for each bank. Advertisements thus offer $1,000,000 or more of FDIC protected funds.
What if an account has multiple beneficiaries? An account that includes beneficiaries (such as Trusts and accounts Payable on Death (PODs)) provides a separate $250,000 coverage limit for each beneficiary that is listed on the account.
Additionally, in the past, only qualifying beneficiaries were given separate coverage from the FDIC, limiting the beneficiaries primarily to spouses, children and parents. Under the new law, any trust account with beneficiaries that are persons, charities, or Internal Revenue Service recognized nonprofit organizations will have the same protection.
The expansion in FDIC coverage is in effect until the end of 2009. However, commentators are anticipating that the increased protection will be made permanent. In addition, as of October 14, 2008 and through the end of 2009, FDIC coverage is unlimited for noninterest bearing deposits such as checking accounts.
In the past, investors were aware of the FDIC limit, but generally felt safe in exceeding that limit " sometimes by a large amount. These days, many are taking a closer look at the safety of all of their investments.
The increase in the FDIC limit is designed to give investors greater confidence in maintaining larger savings account balances. Thus, providing banks with more money to lend, and in turn easing the credit crunch.
The increase means that an individual may have up to $250,000 in any one bank secured by the federal government (including all deposits at a single bank held in checking accounts, savings accounts, certificates of deposit (CDs), and half of the value of a joint account) and brings the insurable limit equal to that of an Individual Retirement Account (IRA). Note that an IRA held at a bank has a separate $250,000 limit from other accounts held at the same bank.
Many banks have offered creative programs to expand FDIC protection for their customers. When a customer holds funds in excess of the limit, a bank may partner with other banks to share the deposit. While the customer deals with only one bank, the customers funds are actually held by multiple banks taking advantage of the full $250,000 protection for each bank. Advertisements thus offer $1,000,000 or more of FDIC protected funds.
What if an account has multiple beneficiaries? An account that includes beneficiaries (such as Trusts and accounts Payable on Death (PODs)) provides a separate $250,000 coverage limit for each beneficiary that is listed on the account.
Additionally, in the past, only qualifying beneficiaries were given separate coverage from the FDIC, limiting the beneficiaries primarily to spouses, children and parents. Under the new law, any trust account with beneficiaries that are persons, charities, or Internal Revenue Service recognized nonprofit organizations will have the same protection.
The expansion in FDIC coverage is in effect until the end of 2009. However, commentators are anticipating that the increased protection will be made permanent. In addition, as of October 14, 2008 and through the end of 2009, FDIC coverage is unlimited for noninterest bearing deposits such as checking accounts.
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